Premier's RHM plans

14 December, 2006

Page 4

Innovation and investment were promised by Premier Foods after it took over RHM, which comprises milling, bread and cakes businesses, for £1.2bn this week.

Premier's chief executive Robert Schofield told British Baker: "This acquisition transforms our scale and we believe it will enable us to be a better partner with our retail customers."RHM's bread and bakeries division has been performing very well with growing sales and margins. Premier plans to improve performance through a tight control of costs, strong innovation and category expansion."He said that the cakes division will be integrated into Premier's Grocery division.Schofield added: "Hovis is a fantastic brand with great potential both in bread and adjacent categories - it will be our biggest brand when the acquisition completes, with £380m of sales. There is tremendous potential to stretch this brand into other categories."He continued: "There are costs to come out of the overhead structure of the business but we see the bread and bakeries business as offering significant opportunities."City investment analyst, David Lang of Investec, told British Baker: "Milling and baking are new areas for Premier so it would would doubtless be keen to retain RHM's management to run the show."Combining Premier and RHM in a new UK food industry leader should raise purchasing power, and management also expects to enjoy a stronger negotiating position with retailers," said Lang.
"Premier is eyeing up distribution where it says its scale might provide opportunities for radical new solutions. It's not the first outsider that thinks it can fix endemic bread delivery efficiency problems."At an investors meeting held by Premier on the morning of the takeover announcement, Lang said the company outlined plans to extend the Hovis brand."It sees opportunities for Hovis outside its bread core. A biscuit revisit and cereals were mentioned," he said. "The Hovis relaunch has been successful and its new 'health' positioning could be used to extend the brand."RHM invested £20m in new products, packaging advertising in July 2006.